Banks strive to balance regulatory compliance and customer expectation

Familiarity breeds contempt. That’s how some bank compliance officers have come to regard the TILA-RESPA Integrated Disclosure Rule (TRID). I’ve heard some compliance officers transform the acronym into “The Reason I Drink.” I agree that the complexity of the changes brought about by this portion of the regulation make this joking reference to TRID a fitting description. But, as we are well aware, compliance is no joking matter.

Trying to list all the different elements of TRID that are troubling bankers seems to be an impossible task. The regulation itself has different variations based on the type of loan the customer is applying for, what fee goes where, who pays the fee, whether or not the bank retains the fee, and how it affects the customer. Programming the TRID disclosures to accommodate the extent of loan types presents a seriously challenging task for each bank. There is some level of ambiguity among all the different possibilities that each individual loan presents. Under these circumstances, some level of violations is practically unavoidable.

Realizing that some unintentional violations will likely occur, bank management shouldn’t expect loan officers to never make any errors and do everything right the first time. Instead the bank should focus its efforts to ensure the customer is not harmed, that any errors can be fixed, and that the bank can continue to be profitable, while still servicing the loan needs of its community.

It’s definitely important that banks identify and prioritize the compliance risks associated with TRID. But speaking from personal experience as a customer having recently gone through the loan process, it’s also important to set a realistic customer expectation. It seems ironic that disclosures meant to bring clarity to the customer can cause more confusion. However, it doesn’t have to be this way. Ongoing training must be provided — not only for the compliance officer and audit staff conducting review, but for lenders, processors, and other frontline staff who interact with customers.

Ensuring an open line of communication with real estate agents and settlement agents also enhances the customer experience. These professionals who partner with banks should also have continuing professional education on TILA-RESPA and other banking regulations so that expectations are realistic and not in conflict with the realities of the closing table.

Compliance officers and quality controls can catch mistakes after the fact, but interaction with the customer and clearly explaining the disclosures is paramount to customer service and compliance. A good customer experience depends not only on how readily accessible information is; having someone who can answer questions about the disclosure forms will help avoid confusion and customer frustration. “I don’t know” is not an acceptable answer. “I don’t know, but I can find out” is an answer that is commonplace in the compliance world. This approach should trickle down to frontline staff. The more effective your education process is, the higher the likelihood of a happy, repeat customer.

The KraftCPAs financial institutions team is available to help if you have questions about regulatory compliance or need compliance training for any of your personnel. You may reach a member of our financial institutions team at (615) 242-7351.

Source: OCC, FDIC, CFPB, FTC, and NCUA, reference 12 CFR Parts 1026, Sections 19, 37, and 38

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